Taxation of Ill Gotten Gains in South Africa
Taxability of stolen money
It has recently been reported in the press that SARS has lodged a claim for R183 million in income tax against the estate of the slain mining magnate, Brett Kebble in respect of the R2 billion allegedly stolen by him from the mining companies of which he was a director. It is further reported that the Master of the High Court has rejected the claim on the grounds that the amounts on which SARS sought to levy tax constituted money stolen by Kebble, and that stolen money is not subject to income tax. It has been reported that SARS is to take the Masters decision in this regard on review. Why the issue is being contested on the basis of review, as distinct from the ordinary process of assessment followed by objection and appeal, is not clear. A review is concerned only with the regularity of the process by which a decision was reached, not with the correctness of the decision itself. A moot point of tax law
The Kebble case raises an interesting and unresolved tax issue and, in view of the large sum at stake, it may be a case that will go all the way to the Supreme Court of Appeal and bring long-overdue certainty to the law. The Income Tax Act No. 58 of 1962 (the Act) is of no assistance in determining the issue. Section 23(o) states that payments that are illegal in terms of Chapter 2 of the Prevention and Combating of Corrupt Activities Act No. 12 of 2004 or that constitute a fine or penalty for any unlawful activity carried out in the Republic (or in any other country if that activity would be unlawful if carried out in the Republic) are not deductible for income tax purposes. There is, however, nothing in the Act to say that the recipient of corrupt or illegal payments is (or is not) subject to income tax on such amounts, and this issue must, therefore, be resolved by the application of common law, that is to say, in terms of principles laid down by the courts. In COT v G [1981] (43 SATC 159) the
It has recently been reported in the press that SARS has lodged a claim for R183 million in income tax against the estate of the slain mining magnate, Brett Kebble in respect of the R2 billion allegedly stolen by him from the mining companies of which he was a director. It is further reported that the Master of the High Court has rejected the claim on the grounds that the amounts on which SARS sought to levy tax constituted money stolen by Kebble, and that stolen money is not subject to income tax. It has been reported that SARS is to take the Masters decision in this regard on review. Why the issue is being contested on the basis of review, as distinct from the ordinary process of assessment followed by objection and appeal, is not clear. A review is concerned only with the regularity of the process by which a decision was reached, not with the correctness of the decision itself. A moot point of tax law
The Kebble case raises an interesting and unresolved tax issue and, in view of the large sum at stake, it may be a case that will go all the way to the Supreme Court of Appeal and bring long-overdue certainty to the law. The Income Tax Act No. 58 of 1962 (the Act) is of no assistance in determining the issue. Section 23(o) states that payments that are illegal in terms of Chapter 2 of the Prevention and Combating of Corrupt Activities Act No. 12 of 2004 or that constitute a fine or penalty for any unlawful activity carried out in the Republic (or in any other country if that activity would be unlawful if carried out in the Republic) are not deductible for income tax purposes. There is, however, nothing in the Act to say that the recipient of corrupt or illegal payments is (or is not) subject to income tax on such amounts, and this issue must, therefore, be resolved by the application of common law, that is to say, in terms of principles laid down by the courts. In COT v G [1981] (43 SATC 159) the